China continues its expansion and growth into different industries around the world. As China expands, the country is under increasing pressure to remove the B2B payment system bottleneck. For small and medium-sized companies, the cross border B2B payment bottleneck is a significant issue. This is because of China's laws. Businesses that operate in China together with SMEs are also affected by the B2B payment problem.
Monopoly in Chinese Banking B2B Payment Monopoly
There are three ways for making B2B Chinese payments. Bank transfer also called telegraphic transfer, is the most common. The most popular method of sending foreign payments to Chinese companies located on the mainland of China is via telegraphic transfers. This is a difficult option for SMEs to access because they may not have the capital and paperwork necessary to authorize bank transfer inside China or payments made into China. Additionally it is extremely difficult to plan a telegraphic transmission.
The bank transfers tend to be completed within five business days after the date of the transaction. The recipient company might need to ship paperwork and personnel back to China after the funds have been received.
While SMEs and even new companies might be able fulfill all the requirements of sending and receiving funds via transfer via telegraphic means, it's an issue that Chinese banks have a strict policy of limiting access to bank transfers for small financial institutions and businesses that are not banking. China has 4500 banks that are licensed to make or receive bank transfers.
While that number is quite huge, it's not enough to satisfy the requirements of the market. The inability of the current system to satisfy the demands of the burgeoning market in China is the cause of the bottleneck that has been created by the countless transactions flying back and forth across China's mainland Chinese border.
Electronic Payments
A large portion of mainland Chinese customers are using electronic payments. In 2018, 92% (or 47% of the rural China) employed their smartphones every day to pay for purchases. WeChat Pay is the main service provider. Alipay is also a very popular choice. The simplicity of these transactions is unbeatable. It takes just seconds to allow consumers to scan the QR code the seller and then pay with their phones.
These applications are available for foreign businesses who want to market their products to Chinese tourists. The accessibility of electronic payment substantially increases the chances that Chinese tourists will buy goods. Indeed, their spending could amount to 25% of the sales of brands (in millions of dollars) during a particular year. The issue is that sellers need to register with the Chinese payments system and get their sales processed through the system. For firms with limited contacts with business partners and/or activities in China this can be a significant challenge.
Cash on Delivery
Cash on Delivery is the most well-known payment method utilized by Chinese consumers in the present. Since it is available to those who do not have an online account or who don't have the tech skills, the system can outdo electronic payments and bank transfer. COD is a preferred method of payment since buyers are able to see the quality and condition of goods prior to purchasing them. The seller pays a small amount and the bank-not-banking provider handles this service. This system is win-win for all. The biggest third party non-banking payment service providers include Dangdang, Amazon, and JD.com.
However, this method comes with a drawback. The third party involved in the transaction must be compensated to be able to process and deliver the payment. Third party transaction or service fees could slow down the process of receiving payments from customers and increase the seller's time to collect them. Both parties would prefer to eliminate the third participant in the transaction to streamline the delivery of items or services and also the transfer of money from the customers to the sellers.
Financial Sector Innovation is driven by SMEs
Over 60% of the foreign commerce was created by mainland Chinese SME's in the year 2015. They contributed to the rapid growth of e-commerce and fintech solutions for international ecommerce issues. At present, SMEs on the mainland China are responsible for the disruption of the Chinese banking system, as well as the revolutionary changes in how cross-border payments are handled within China and internationally. SMEs also serve small markets that larger firms cannot. This will increase the pressure on China's banking system to make it simpler and streamline commercial transactions to allow smaller, less established businesses to expand and help the growing demands of China's commercial sector.
As the belt route project gains momentum and large companies must be focused on the Chinese government's requirements for their business, it is likely that SMEs will become the ones that serve the needs and desires of the poor and less powerful. They will require financial products that are available to the people they serve.
B2C and Fintech
In the long run Aleta Planet's solution for the cross border bottleneck problem is that its payment processing are faster than conventional bank transfers, and simpler, hassle-free transactions means that it is stimulating growth in local businesses. These developments are beneficial for the fintech and SME industries. Additionally, these technological advances boost international B2C commerce expenditure. This, in turn, stimulates the development and use of fintech solutions for B2C transactions.
In the course of how the mainland Chinese economy evolves into more of a consumer economy it is essential that there aren't many obstacles to the movement of money and goods across the Chinese border. AP-1 Business is a platform that permits Chinese suppliers to get fast payments.
Fintech can help us.
Fintech companies have recognized the market gap and have created solutions. Customers such as small and medium-sized enterprises and online sellers demand better service and financial solutions. Fintech firms combine technology, finance, creativity, and technology to produce new solutions that reduce the limitations put on SMEs, making it easier to do business. http://kameronwjqt563.theglensecret.com/unionpay-ap-1-virtual-card-for-business-re-imagning-b2b-cross-border-payments-in-china-by-aleta-planet-lakala
The company's goal is to make cross-border B2B payment more easy, accessible, less complex and more practical for Chinese companies. One such firm that is leading the way is Aleta Planet. Aleta Planet developed a system that is based upon the UnionPay network, which streamlines the process of making payments to and from China. Regular payments made by foreigners are also more viable.
Business AP-1
AP-1 Business, which is a digital account for business entities situated outside of China can be found. It can process transactions in T+1. Bank transfers generally take between 5 and 10 days to process. This permits quick access to payments and also guarantees. The AP-1Business service is based on UnionPay and the payment is moved from offshore UnionPay account (AP-1Business) and then to an account inshore UnionPay that is owned by the provider.
The AP-1 Business service also offers other benefits. Foreign companies doing business with Chinese firms will find the AP-1 Business benefits appealing.
The most important features
All-in-One Service
AP-1 Business delivers an all-in one solution that makes it easy to send, receive, process, and transfer remittances. Investors and foreign owners can use this service. There are no limitations concerning foreign ownership of business accounts which are opened with the AP-1 Business. Additionally, businesses can open business accounts with the AP-1 Business account without a director's physical presence in Singapore.
Since it's part of UnionPay, AP-1 Business can provide its customers with superior customer service. All Chinese banks and financial institutions can use the UnionPay platform. AP-1 Business took out the middleman and made the process seamless by using this platform.
In contrast to banks, which must transfer money via other intermediary banks, money is transferred through AP-1 Business is credit directly to the beneficiary's' bank account. AP-1 Business also allows users to withdraw money from ATMs. It is supported via Huawei Pay and Visa. This ATM cash withdrawal facility is expected to start operating in the second quarter of 2021.
Attractive rates for foreign exchange
Another attractive aspect of A-1 Business is its foreign exchange (FX) rates. The company offers the lowest rates for FX directly (SGD-RMB) for China through its UnionPay network. The rates for FX are extremely competitive, especially when you consider that numerous online payment providers charge lower FX rates or charge fees to transfer funds between countries. The AP-1Business guarantees that customers get the most competitive FX rates when cross-border transactions are necessary.
There aren't any minimum deposits or balances on your account conditions.
In contrast to other business accounts and accounts, AP-1 Business has no minimum amount of balance required. This absence of a minimum balance or deposit requirement has enabled certain SMEs to keep their operations throughout the COVID-19 pandemic and to recover, although at a slower pace. AP-1 Business aims at providing modern financial solutions that aren't available through the banking sector.
AP-1 Business customers can make international payments to China using the AP-1 Business Virtual Card. The card functions much like a prepaid card. Payments and purchases can be made using the account's existing funds.
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